Guide to building the right location strategy
Building a comprehensive location strategy is a crucial aspect of modern business planning. Depending on your business objectives, good location decisions can help your company become more visible to your customers, reduce operating costs, or gain access to global engineering talent.
To succeed in location planning, companies need to perform meticulous market research, analyze their competitors' moves, formulate a precise but flexible roadmap, and execute it flawlessly. Despite that complexity, making informed decisions on where to locate a new office (or an entire branch of a business) is practically always worth it, as the benefits of operating at an optimal location greatly outweigh the costs of finding it.
Maxima Consulting has successfully supported companies in many industries, including the financial sector, telecommunications, and logistics, in expanding to new locations. Read this article to discover our approach to building workforce and location strategies for our clients and learn what we do to ensure that a company's location strategy results in gaining market advantage, reaching set diversity goals, improving employee productivity, and maximizing operational cost-effectiveness.
What is a location strategy, and why is it important?
A location strategy is a detailed action plan used in business to determine where an organization should hire its workers and establish offices, stores, or warehouses. A well-crafted strategy can become a powerful tool in optimizing the placement of employees and facilities, whether a company's plan is to expand into a new country or region or to consolidate some of its jobs and functions to streamline operations and cut costs.
A well-executed location strategy can enhance the company's operational efficiency and pave the way for future growth opportunities. However, developing successful location strategies requires a deep understanding of many factors, including local economic incentives for investing companies, regional political stability, workforce compatibility, and market maturity. To navigate this complexity, many companies choose to team up with specialized consulting partners with experience in the local market, strategic analysis capabilities, and a comprehensive understanding of both the global economy and local regulations.
Five steps to a successful new location strategy
Step 1: Define business goals for each new site and each existing facility
Determining what success looks like and setting measurable goals for all locations influenced by your new strategy is a crucial step to developing a conscious and flexible roadmap for your company and all its employees.
Defined requirements and objectives will help everyone understand what stakeholders demand from them and facilitate collecting relevant data, which will be needed to evaluate the strategy execution process later.
Step 2: Research prospective locations and new markets
By analyzing local business ecosystems, workforce and market trends, and competitors' behavior in all prospective locations, businesses facilitate making better decisions, reduce the risks associated with such a huge investment, and develop favorable conditions for their future growth.
To learn more about this step, consult the list of key factors to consider when researching locations below.
Step 3: Develop your new location strategy and stick with it
Whether your strategy involves building a new remote site or reducing the number of existing facilities to streamline the operations, the site selection process is quite similar. Developing a precise implementation plan will immensely increase your chances of success.
Compare data from your location research with the goals and requirements you defined to facilitate the decision process. You need to carefully consider several location-specific factors, analyze what resources and services are available at each site (internally and externally), and conduct a cost-benefit analysis to identify locations with the most promising future.
After weighing the pros and cons of each location, calculating risks and rewards, and making a final decision, stick with it. Even if other companies seem to have better results elsewhere, remember that your company is unique, and you made a deliberate choice based on your specific situation. Give your location strategy enough time to gather more data necessary for evaluation and optimization.
Step 4: Execute the program and focus on meeting your goals
When the choice is made and confirmed with stakeholders, it's time to communicate the decision to employees and customers and execute the location strategy. With measurable goals acting as your guidelines, a precise action plan for new site development, and trusted partners in the service business to aid all of your expansion activities, everything that remains is to focus on the strategy implementation. Remember to document your progress, as it will come in handy in the next step.
Step 5: Evaluate your progress and revise the strategy
No matter how well-prepared your business is, no location strategy is ever perfect. No expert can predict all obstacles coming your way in a new location, and no process can prevent all challenges arising from your consolidation efforts and the ever-evolving needs of your customers. With so many factors influencing your business's success, the best location strategies are the ones flexible enough to make adjustments when necessary without sacrificing your key requirements.
In reality, the evaluation and optimization step plays a significant role no matter how successful the strategy is. Even if everything is going exactly as expected, your new experience in a new location is bound to broaden your horizons and generate new ideas for increasing the productivity and profitability of your company.
Keep an open mind and remain responsive to local culture and community to unlock even more business benefits in the future.
Key factors to examine when researching new locations
Physical proximity
The physical proximity of the prospective facility to your existing locations and potential impact on efficient communication capabilities and transportation costs.
Talent quality and talent availability
The quality of local talent usually results from the education system's quality, the number of graduates, and international migration trends. Talent availability is affected by the relative strength of your job market competitors and the overall ratio of supply and demand for relevant skilled labor in the local community.
Business ecosystem
Judging the business ecosystem at any given location calls for examining how business-friendly local economic policies and other governmental regulations are, whether the country is a signatory to any trade and other international agreements, and whether there are special economic zones or other notable incentives for foreign investors.
Estimated cost of investment
When estimating the cost of establishing a site, make sure to account for facility/office space costs and other infrastructure costs, talent acquisition and labor costs, transportation costs, energy and amenity bills, typical rates of all necessary external services, costs of regulatory compliance (e.g. to cross-border data transfer regulations) and taxes.
Local culture and other societal factors
Evaluate the general quality of life in the country, its capital, and other larger cities. Assess the availability of healthcare, political stability, crime rate, and shared community values.
More tips to improve your location strategy
Consider the recommendations below to maximize your chance of building a good location strategy!
- Before committing to building a new site, research the alternatives, including founding a new office in a Build-Operate-Transfer model with a specialized partner and going for relevant managed services.
- Examine the shape of the local real estate market, including current and projected office space cost and the overall quality of existing office locations.
- Determine the proximity of your potential office locations to other big cities in the area.
- Consider the impact of necessary transportation costs on your bottom line in all prospective locations.
- Leverage official population and labor data to evaluate education levels, assess talent supply and talent demand, and uncover projected population growth.
- Find out how many of your competitors already contend for the same talent in the same exact location.
- Adapt your job postings and the recruitment process to accommodate the expectations of local employees.
- Identify at least one key opportunity to differentiate your organization from other companies operating in the local market and become a desirable employer (for example, in a country where companies prefer their employees to work from the office, consider allowing remote work).
Let's build the best location strategy for your business
In today's dynamic global economy, businesses must form research-based location strategies when deciding where to set up their new facilities and hire new employees. Investing in an optimal location will enhance any company's efficiency and result in more growth opportunities in the future.
Increase your chances of formulating the right location strategy by partnering with Maxima Consulting. Leverage our vast expertise in setting up remote excellence centers and specialized onshore and offshore teams for global clients in various industries. Learn more with our guides to outsourcing in India, offshoring to Poland, and setting up a business in the Netherlands.
Contact us today to schedule a free consultation with one of our workforce and location experts.
